Regulation of Pipelines

Oil and gas industries are regulated for several factors, like technical, safety, environmental, and economic reasons. Regulatory measures are adopted even before hydrocarbon production. In the natural gas industry, regulation is usually harder than the oil industry, due to the existence of natural monopolies in transmission and distribution activities. Due to the economic characteristics of the natural gas chain, it was structured in vertically integrated companies. In the 1990s, many countries promoted reforms in the infrastructure sectors in general and the natural gas industry in particular. These reforms move toward a more open and competitive market. They were (and still are) based on legal and regulatory changes, introducing competition whenever possible, and regulating natural monopolies. In the natural gas industry, the main issue is access to pipelines, which are the natural monopoly. It is impossible to promote competition without agents having access to pipelines that connect producers to consumers. Brazil’s natural gas industry reform is still in process and some measures to open the market and attract investments have already been established. The focus is on granting access to pipelines and essential facilities and changing bilateral relations to a more liquid market. Nonetheless, it is necessary to enhance regulation to reduce regulatory risks and to reach a competitive market in the Brazilian natural gas industry.